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Indomobil Sukses Internasional

The industry of car sales in Indonesia is always interesting, as people from the upper and middle class is, almost certainly, to have at least one car in their garage, and they are routinely replace their car with a brand new one after some years or months. In the past, the most popular car brand in Indonesia was Toyota, and it still is. But recently, there are some brands of cars that were previously less known to the public, now it can easily be found on the roadway. One of them, Nissan, with its top types, such as Nissan Juke, March, and Grand Livina. Who holds the Nissan brand in Indonesia? No, it wasn’t Astra International (ASII) or one of its subsidiaries, but Indomobil Sukses Internasional (IMAS).

IMAS is a business unit of Salim Group in the sale of vehicles of four wheels or more (cars, trucks, etc.). Some of the brands held by the company are Nissan, Audi, Hino, Renault, Suzuki, SsangYong, Volvo, Volkswagen, and most recently, Infiniti (Nissan's premium brand, such as Lexus of Toyota). For the Volvo brand, IMAS is also sell a variety of heavy equipment (so IMAS is also a competitor to Intraco Penta/INTA, that sells heavy equipment with the same brand). In addition to selling cars and heavy equipment, IMAS has also a number of subsidiaries in the field of automotive financing, motorcycles sales, car rent, spare parts production and distribution, as well as a small-scale mining contractor company.

Although IMAS sell various brands of cars and also have some kind of business outside of the car sales business, but more than half the company's revenue comes from the sale of cars of one brand, Nissan. In the First Half 2012, IMAS recorded Rp9.8 trillion revenue, of which approximately 54.5% or Rp5.4 trillion of them come from the sale of Nissan brand. Thanks to some of its excellent types, especially theNissan Grand Livina. Until the end of August 2012, the Grand Livina is the best-selling type of Nissan with contributions reaching 50 - 60% of total sales volume. Also, because of Livina, Nissan was successfully holds the 9.6% share of the car market in Indonesia in the First Quarter 2012, or was already ahead of Honda, but it was still behind Toyota, Daihatsu, Mitsubishi, and Suzuki. The point of plus of Livina is quite clear, namely its image as a comfortable, safe, and stylish family car, but at an affordable price, starting from Rp160 million.

Going forward, Nissan will keep continue to developing and launching some of new types, including Nissan Evalia of which, according to the claim of the company, has reached 5,200 units of sales in the period of May to July 2012.

Has successfully with Nissan, IMAS’ revenues was also successfully grew by 41.6% in First Half 2012 compared to the same period of the previous year. Yet, its net income was only grew 25.0%. The reason? Because the company had spent Rp8.2 trillion to increase the supply of cars to be sold. The cost was grew 67.2% compared to last year, or greater than sales. Usually this is happens because of the weakening of the Rupiah against US Dollar recently, given that most of cars sold by IMAS, either built up or just components, derived from imports.

Anyway, the success of Nissan from the year of 2010 until now is certainly will bring some actions to its competitors, particularly to Honda that was just 'overtaken'. That's why Honda was, in this case PT Honda Prospect Motor, immediately launched new types, ie Honda Brio and the New Civic. Then the market leaders in the automotive industry in Indonesia, ie Toyota and Daihatsu, were also launched Toyota Agya and Daihatsu Ayla, which is absolutely will be serious contenders for Nissan March at the segment of low price car. And don’t forget the newcomer from India, Tata Motors, with ist flagship type, Tata Nano. The battle has just begin!

So what is IMAS’ strategy to at least maintain their current position? Of course, with also launched a number of new types, such as the Nissan Evalia as already mentioned above, and by expanding the sales network, mainly for markets outside Jakarta. In 2012, IMAS has opened at least one new Nissan dealer, located in Bekasi, West Java. Excluding Nissan, IMAS also remain empower other brands they hold, by launching several new types like Audi Q3, New Volkswagen Caravelle and New Volkswage Touareg.

But the big question is related to the minimum DP of 30% for the purchase of private cars, which was offically issued by the Bank Indonesia in March 2012, and became effective in last June. In the company's public expose organized in April 2012, President Director of IMAS, Jusak Kertowidjojo, admitted that the regulation about minimum DP will impact the company's performance, but didn’t detailed how big the impact is. Then what is the company's strategy related to it? Well, there was also no details about it. But indeed, this is a common problem for the entire automotive industry in Indonesia, not only for the company.

By the way, if you ask, why the stocks of ASII is likely not affected by this DP issues and instead still continued to rise? Well, it was because of two things. First, ASII is a company which is engaged in a lot of sectors, not just selling cars, where the other sector that also give great contributes to the company is the sale of heavy equipments and mining business through its subsidiary, United Tractors (UNTR), with a contribution of more than 30 % of ASII’ total revenues. You’re right, IMAS is also has a heavy equipment business, but the contributions are only about 5% of total revenue of the company. Second, ASII has a status as a favorite blue chip stocks in the Indonesian Stock Exchange (IDX), and currently the foreign investors is actively entering into the market. This status is not held by IMAS, which some investors are still regarded it as a second liner stock.

Okay, now what about the stocks?

During the year 2011, IMAS had successfully climbed from the position of 4,075 in early 2011, reaching it’s peak at 9,325 in May 2012, which was mainly due to the excellent performance of the company over the period. But when the announcement about the minimum DP was released, IMAS was then sink to it’s current position of 5,200. Unfortunately by technical, there are no signs yet that the declining would stop.

In valuation, IMAS’ PER was 9.0 times at a price of 5,200, it is not expensive actually, considering that the company’ ROE reached 18.8%, and its net profit growth is still maintained above 20%, ie 25.0% to be exact. However, if we consider that IMAS would not be able to ‘make a deal' with the DP problem, and also there is no clear strategy of the company related to competition with its rivals, especially with Agya and Ayla (because some people said that the price of those two cars were only Rp100 million, while Nissan March is actually not that cheap, but Rp150 million), then it becomes no certainty for IMAS to continue its good performance in the future. If you are also considering of this, then IMAS at its current price is still a little bit expensive.

On the other hand, IMAS is still have a lot of plans in developing businesses outside selling Nissan cars. When the company held a right issue at a value of Rp2.5 trillion in mid-2011, 40% of the funds were used to developing the financial services business, the business of making and selling automobile parts, and sales of trucks and heavy equipments. Including on the 28th September, IMAS announced the establishment of a joint venture with Kyokuto, a Japanese company engaged in the manufacture and sale of truck body. This joint venture is making a truck body manufacturer in Cikampek, West Java, which will start its production in 2013. How would it be? We'll see.

In conclusion, I think IMAS is still attractive, given that Nissan Grand Livina is still the second favorite car in Indonesia for the type of multi-purpose vehicle (MPV), behind Avanza (or Xenia). On the other hand, some things are could potentially hinder the performance of IMAS in the future, and this is making investors to wait and see, and I also chose the same action. For now, let’s see where IMAS would bottomed, and also analyze the development of company’ performance in next third quarter, would it still growing substantially or not.

PT Indomobil Sukses International Tbk.
Rating performance in First Half 2012: A
Rating shares at 5.200: BBB

Original article was written at October 10, 2012

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